Zomato's main focus is on revenues, will return to basics

Zomato will return to basics in the form of focus on old-fashioned topline and bottomline as it reorients itself in anticipation of a tougher funding environment for startups, the biggest investor in the online restaurant guide said on Friday.

“Zomato was very quick to recognise in the August-September period that there are changes in the funding environment. Their new strategy is to deprioritise land-grab and focus on revenues.... a move to break even,” said Info Edge executive chairman Sanjiv Bikhchandani in an earnings call, explaining the reasons for restructuring and mass layoffs at the startup. Info Edge holds close to 47% in the company whose other investors include Sequoia Capital Temasek, and Vy Capital. Zomato raised close to $60 million (Rs 390 crore) in September from Temasek and Vy Capital and a total of $225 million so far. Zomato has expanded overseas, made a string of acquisitions and entered the food delivery business, moves which are being revaluated as the company pursues a new strategy emphasising growth and profitability. The company is learnt to be scaling down content teams and closing some offices in countries where expansion has not been fruitful.

Zomato has laid off about 10% of its global workforce of 3,000 employees. While the impact of its restructuring was felt the most in the US where it acquired Urbanspoon this year, markets such as India and Philippines were also impacted.

In a recent email to employees CEO Deepinder Goyal admitted that revenue growth hasn't kept up with the growth in the sales team. “We are far behind the numbers that we promised our investors for this financial year,” Goyal said in an email.

An investor in Zomato told ET on condition of anonymity that only after critical mass in India was achieved from its core business did Zomato get permission for new lines of businesses. “The new businesses standalone don't have the margins to sustain,” said the investor in Zomato. Food technology startups are feeling the heat as worries grow about the sustainability of business models and the appetite of investors to keep backing companies in the hope of gaining market dominance.